November 29, 2011

Machine Selection Problem for an Engineer - Engineering Economic Analysis

A machine shop engineer has to recommed a machine for his shop.

He has two alternatives.

The new machine costs Rs.3,33,800. At the end of each year of use its market value is estimated to be Rs. 2,75,000, rs.2,20,000, Rs.1,71,000, Rs.1,29,000, Rs.89,000, Rs.57,500, Rs.30,000 and Rs.20,000.

In the first year the operating cost will be Rs.30,000. In the subsequent years it keeps increasing to Rs.30,500, Rs,32,500, Rs.37,000, Rs,48,000, Rs.60,500, Rs.75,000 and Rs.92,500.

The alternaive is a second hand machine. it costs 1,29,000. Its resale value infuture years will be Rs.89,000, Rs.57,100, Rs.30,000 and Rs.20,000.

The operating cost will be 57,000 in the first year, and will be Rs.62,000, Rs.68,000 and Rs. 75,000 in future years.

What should be the recommendation of the engineer?

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